Business Economists See Riskier Mortgages as Biggest Danger, but ...

According to an article in USA Today, a report to be issued today indicates that, among business economists, "subprime mortgages" are considered the greatest risk to the financial markets. They are, however, in good company, as "hedge funds" and new forms of credit card lending without traditional credit history checking are raising concerns.

Riskier financial strategies have been making the news lately, as "hedge funds," described as "eclectic" in their strategy by an International Monetary Fund article, often located in tax havens and otherwise avoiding tax and regulatory issues, are causing concern. In the U.S., "subprime" mortgages have been enticing less-qualified borrowers with "teaser" rates and more recently an increasing foreclosure rate, and banks such as Bank of America are beginning to offer credit cards to anyone who has a "taxpayer ID number," which is a number issued to anyone who pays taxes in the U.S.

Economist article strikes positive note

A major new article in The Economist magazine, entitled, A Place in the Sun, explores the pros and cons of offshore financial centers, with specific references to the Cayman Islands.

The article, by Joanne Ramos, covers a wide range of themes, as it gives an overview of offshore financial centers, and the reasons for the expansion in their business in recent years.

The article argues that many of the concerns (especially in the present climate of concern over money laundering, and terrorism-financing operations) over offshore financial centers (OFCs) are often exaggerated. It also argues that well-run jurisdictions of all sorts, whether on- or off-shore, are good for the global financial system.

The article has won praise from Ted Bravakis, Director, Public Relations Unit, Portfolio of Finance & Economics, Cayman Islands Government.

Offshore debters welcomed

If offshore banks deal only with the big-time, at least one institution in The Bahamas has taken a really big risk on a really big spender.

Debts due Bahamian offshore banks had bounced erratically between $5 and $20 million from 1995 to 2005.

But last year, the secretive group reported a whopping $525 million in debts due Bahamian offshores. To reiterate, that's at least 2,500 percent larger than any one year over the past decade.

There's no telling which of the more than 240 licensed banks and trust companies made the move, as their balance sheets are not exactly available to the public.

The most reliable information comes through the Central Bank's Quarterly Statistical Digest, which reports the assets of offshore banks in conglomerated numbers.

Banks to Spend More of IT Budgets Offshore

Banks worldwide will be sending more of their information technology budget dollars offshore in the next three years, according to a study by Deloitte & Touche USA LLP. The study estimated that as much as 30% of the banking industry's IT budget dollars would go to offshore services by 2010, up from 6% currently.Banks can save 40% on most IT projects by offshoring them, Deloitte said. Although media reports say offshoring costs are rising, the Deloitte survey of banking IT executives found that costs rose less than 10% this year, according to 55% of the survey respondents. Banks need to get better at developing internal management skills and business processes to make offshoring as efficient as possible, Deloitte said.

Click on "Read More" below for the full article by Information Week.

$7B proposed over Indian trusts suit

The U.S. government has proposed paying $7 billion to settle lawsuits over the management of Indian trust lands -- an offer met with immediate objections from Indian plaintiffs. At issue is a decade-old lawsuit by Indians against the government claiming that the government has mismanaged more than $100 billion in oil, gas, timber and other royalties held in trust from their lands dating back to 1887. The litigation, filed in 1996 by Blackfeet Indian Elouise Cobell, deals with individual Indians' lands. Several tribes have also sued, claiming mismanagement of their lands. Senate Indian Affairs Committee Chairman Byron Dorgan, D-N.D., said he will hold hearings on the proposal and said the settlement offer is the first time the federal government has acknowledged a multibillion dollar liability for mismanagement of the trust funds over the past century.